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How Incubators Will Help Start-Ups Lead the Clean Tech Revolution

Presidio Economics | Friday May 20th, 2011 | 2 Comments

ban-startup-friday

This post is part of a blogging series by economics students at the Presidio Graduate School’s MBA program. You can follow along here.

By James Parle

Entrepreneurs are busy developing some of the technologies that will lead the way. As their small companies work to improve the future of humanity, they will need the support of clean tech incubators well versed in the intricacies of sustainable business development.
Business Incubation was first introduced in 1959 by Joseph Mancuso upon taking management of a warehouse in New York. 

Ironically, one of the early participants in his shared business space was a poultry company and this is where the name business incubator stems from.  Start-up incubators provide work space, prototyping facilities, subject specialists, contact with investors, legal services, definition of target markets, and overall, a nurturing environment for business growth.  Companies that participate in start-up incubators are significantly more likely to be profitable in the long run than those who go it alone.  Incubator graduates have an 80% chance of being profitable in two years and still in business in five years.

A sustainable incubator would be run on the basis of the triple bottom line while encouraging the start-up companies within the incubator to do the same.  Limited funding and short time horizons leave stand-alone start-ups without the time for such optional activities that utilize resources.  The incubation process, which already supports start-ups with similarly challenging tasks in the realm of business management, is the ideal forum to do the same in the realm of sustainable business practice.  Participating companies would not have to formally invest their time into learning sustainable business practices, instead, the sustainable incubation process itself would provide an immersion into the culture of a sustainable business such that as the start-up grew, the company could, and with higher probability, would, seamlessly incorporate sustainability into its core values.

Clint Wilder who co-authored the book The Clean Tech Revolution was gracious enough to agree to an interview and suggested that he knew of no incubators that included an exploration into sustainability during the incubation process.

Hub Ventures is one example of an incubation program that incorporates sustainable principals, but it is far from the norm.

A subtle, but fundamental dichotomy exists between implied purpose and actual practice of these incubators and their clean tech offspring.  It seems counter intuitive, but many companies that produce clean tech do not practice sustainable business practices.

If incubators included sustainable principals in their teachings, companies that grow out of the incubator would already have an inherent sustainability culture that would be infused into the company’s founding DNA. A sustainable seed would be planted.  In the long run it has been shown that there is a business case for sustainability and these growing companies would not require a mid-course correction as they grew and their lack of corporate responsibility impacted their bottom line.

Clean tech requires in most cases substantial hardware development.  We need investors who are willing to step away from the obsession with the quick returns of software start-ups. Clean tech start-ups as well as other ventures could benefit from business incubators and in particular from the addition of a sustainable oriented culture during the gestation period.

The Obama administration is passionate about making the US a leader in clean tech and is planning to direct $50B towards clean tech development in the near future.  Now we just need sustainable clean tech incubators to enable these companies to lead the clean tech revolution.

 

James Parle is a 2012 MBA candidate at Presidio Graduate School in San Francisco California.  He looks forward to combining his previous engineering efforts with his latest deep dive into sustainable business practice.  In his spare time he enjoys getting outside and is interested in one day hiking the Pacific Crest Trail from the Mexico border to the Canadian border.


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  • deano

    Interesting article. I agree some clean tech start-ups do seem to be almost paradoxically weak in sustainability practice & principles. As you point out, ‘clean tech’ is almost too broad a description to be useful in understanding why that is. When one recognizes that clean tech companies are really just slightly reinvented semiconductor companies, electronics manufacturers, plastics manufacturers, etc, etc; it’s less surprising clean tech leaders can be tone deaf to sustainability. They’ve come from long standing industries with organizational cultures that don’t necessarily have sustainability in their vocabulary. Susty incubation could be a great part of the solution – creating new leadership mindset. There’s also the challenge then of finding funding sources who will back untested leaders. That second part is non-trivial. Maybe concurrently we need to better educate the existing leaders in clean tech? They’ve reinvented their businesses…why not themselves? Enjoyed your post!

  • Mark Galgano

    Based upon my direct experience as a business development specialist in a clean energy incubator and involvement with the NJ Business Incubator Network and the DOE Clean Energy Alliance I would suggest that Clean Energy
    Incubators make a strong effort to collaborate and transfer successful lessons learned. This would enhance best practice and create a broader base of ideas within these incubators to accelerate new venture business growth. In fact, I have observed that many incubators never have their clients dialogue among themselves – an extremely important practice.

    The statistics I have seen reported by NBIA say that about 35% of non-incubated business fails within 5 years as opposed to 85% of incubator graduates. Unfortunately this statistic does not reflect on the number of incubator ventures that fail to achieve graduate status. Based upon my direct experience I would estimate that at leat 35% of incubator startups never graduate.

    I would expect that a review of the approximate 1,700 US incubators (per NBIA) provide only facilities (Space) mail, conferencing and possibly secretarial services.

    I would suggest that the term BUSINESS ACCELERATOR might better fit the definition of the role of a true busiess incubator. The name infers credible customized technical and business support.

    While working with about eighteen clean tech relates ventures, I required that they begin making customer calls within the first three months of entry. This provided a real world experience that helped define their business “value proposition” and provided the important focus necessary to enhanbce their potential for success.

    When a venture was ready for financing, I introduced them to specific organizations that oculd advance them to “later stage” status. This included two important groups. The first were engineering firms focusing on their technology space. Often these firms were able to enter joint venture agreements to promote the technology and added technical muscle to the new venture – that they could not afford otherwise.

    The second group were law firms that could structure favorable investment strategies and recommend potential investors from their client lists. Accounting firms would be in a position to do the same.

    The topic of BUSINESS ACCELERATION is ultimately must support and grow the passion of the venture to work to succeed in the real world marketplace.